The renewable energy industry has expressed concerns over changes that the European Commission plans to introduce over state aid rules for alternative power projects.
New guidelines adopted by the commission are aimed at supporting member states in reaching their 2020 climate targets, while addressing the market distortions that it said may result from subsidies granted to renewable energy.
The guidelines promote a gradual move to market-based support for renewable energy and include new provisions on aid to energy infrastructure and generation capacity to strengthen the internal energy market and ensure security of supply.
But the UK Renewable Energy Association (REA) has warned that the changes could exclude all 1MW+ projects from the existing UK Feed-in Tariff (FiT) scheme, except onshore wind, where the threshold could actually increase to 6MW.
Under this scenario, the REA said non-wind projects over 1MW would have to claim support through a competitive process, such as Contracts for Difference with auctions. As the Government’s existing CfD scheme is only eligible for projects over 5MW, there could potentially be a policy void for all non-wind projects between 1MW and 5MW.
The organisation said a CfD scheme would be unsuitable for farmers, community groups and energy-intensive businesses that are using the FiT system.
Nina Skorupska, Chief Executive of the REA, said: “Farmers, businesses and community groups have become important participants in the UK electricity supply thanks to the simplicity of the FiT. It has also enabled electricity-intensive companies to save money by supplying their own clean power.
“These new players in the energy mix are unlikely to be able to make new projects work under CfD. We hope the Government will be able to support this diversification in the energy mix through the State Aid Guidelines exemptions, not least so that it can fulfil its new community energy ambitions.”
The REA said the UK Government could offer exemptions on the grounds of supporting new technology, achieving diversification or overcoming grid and system costs.
Originally, the EU had suggested ending the current Renewables Obligation (RO) support before 2017, when the system is due to be phased out. This move has been resolved in the latest EU statement, which has also cleared up ambiguities over support for renewable heat and transport.
But, on the proposals as a whole, Skorupska warned:
“This is a huge leap into the unknown. Policies which pay developers a fixed price for their power have been shown to work and deliver a major increase in renewable electricity – up to 15% last year.
“These new guidelines are based on economic modelling that suggests competitive mechanisms will deliver equally good results at lower cost to the consumer. We support measures to reduce policy costs as renewables continue their journey towards price parity with fossil fuels.
“But putting so much faith in untested theory is a big risk, especially when the UK is in such desperate need of new capacity.”